While Canadians are paying record prices at the gas pump, fossil fuel companies have reaped record profits.
Calgary-based Suncor tripled its profits over the past year, from $821 million to $3 billion.
The cost of producing petroleum-based products like gasoline and diesel has not increased, according to Jim Stanford, an economist and director of the Center for Future Work, a Vancouver-based labor think tank.
Stanford said energy companies profit from high prices at the pump that are unrelated to their cost of production.
“What that means is that in Canada we have tied our energy prices to this roller coaster of the global energy market,” he said. “And that means when that roller coaster goes up, we pay a lot more.”
Stanford spoke with CBC Radio Information morning host Portia Clark on how renewable energy could relieve high prices. Their conversation has been edited for length and clarity.
Information Morning – N.S.6:43Why Oil and Gas Companies Are Posting Massive Profits as Prices Rise
Is there no chance of getting out of this roller coaster, or are we bound to this arrangement?
We have not always been tied to the world price of oil.
Canada, like many countries around the world, used to regulate its oil prices until about the mid-1980s. And that’s because we’re a major oil producer. In this regard, we are under no obligation to pay world oil prices, since the vast majority of the oil we consume is produced here in Canada.
In the 1980s, however, the government – in its wisdom at the time – decided that the private market knew best about these things and that the government had to go. We deregulated prices, we tied our energy price to the world price of oil, and we also got rid of most rules regarding foreign investment in the Canadian oil patch.
The result of that [is that] most of these super profits[…]go to foreign owners because the majority of Canadian industry is foreign-owned. In that regard, it does not even necessarily benefit Canadians.
Even in the situation we find ourselves in now, do you hear a lot of talk about rethinking this arrangement since it does not serve most Canadians unless they are shareholders?
Well, there’s kind of a minimum and maximum approach to handling this.
The maximum approach would be to rethink how we set energy prices for petroleum products.
Our electricity, for example, is still regulated. The electricity bills we pay are tied in some way to the cost of generating electricity through the regulatory system. I think that’s probably a long shot. It would be a huge change in our energy policy. It would take, I think, a few years to debate and put in place.
Why don’t we levy an extra tax on the oil and gas industry while they make these super profits and use that money for something useful?
A potential use would be to accelerate the transition to renewable energy.
We all know that the fossil fuel sector will erode over time due to climate concerns and the shift to a net zero economy. And the faster we do it, the less dependent we are on this global roller coaster. So those are things that I think could reduce the overall harm of what’s happening without having to rethink the whole energy pricing system.
Should oil companies be equipped to invest in renewable energies? Are they doing all of this on their own now with some of this windfall?
No. There are a few oil companies that have, I would say, kind of side projects in some of the alternative or renewable energy agreements.
But for the most part they are not even reinvesting in conventional oil and gas production.
This surge in oil prices and oil profits should not be expected to trigger another oil boom in Canada for a variety of reasons.
Number 1, corporations distribute most of those excess profits to their investors and owners. They don’t put it in anything.
Number 2, the companies themselves know that the long-term outlook for fossil fuels is compelling.
We are heading towards a net zero economy, and this is an industry that will eventually die out.
We will see new projects announced with all this money, but for the most part this will not even translate into more activity in the oil and gas sector, let alone in renewable projects.